SAUDI Arabia’s waning grip on oil prices could loosen further if it sticks to a plan to limit supply in a desperate bid to drive up demand, according to experts.
Naeem Aslam, chief market analyst at ThinkMarkets, said: “In our eyes, OPEC is not the superpower it used to be and it is the US shale oil producers who changed the game.
“But OPEC is not realising that they do not have the control of the price anymore and that US shale oil will remain a threat for them.”
America’s surge in oil production over the past five years has reduced the west’s dependency on the Middle East for the black commodity.
As a result, Saudi Arabia’s economy has taken a huge hit and it has been forced to implement austerity reforms and borrow money from foreign investors.
Lukman Otunuga said: “It has become quite clear that Saudi Arabia’s ability to control prices has weakened considerably and as such the OPEC as an organisation has turned into more of a price taker than a cartel.
“Hence, Saudi needed in November the help of non-OPEC oil producer Russia in order to get the other OPEC members to agree to an output cap.
“With the US continuing to win market share by producing more oil at lower price levels, the global supply excess will take a long time to eradicate.”
Full article: Saudi Arabia plan to hike oil prices will BACKFIRE & boost US shale producers, say experts (Express)